C.I.T. West Bengal - III & Ors Vs.
Oriental Rubber Works [1983] INSC 178 (15 November 1983)
TULZAPURKAR, V.D.
TULZAPURKAR, V.D.
ERADI, V. BALAKRISHNA (J) MADON, D.P.
CITATION: 1984 AIR 230 1984 SCR (1) 817 1984
SCC (1) 700 1983 SCALE (2)682
ACT:
Income Tax Act, 1961- Sec.132- Interpretation
of Sub- sec.(1) -Seizure of books of account and documents-Sub- sec.(8)
retention of books beyond 180 days of seizure-Read with sub-secs. (10) &
(12) -Impose statutory obligation on Revenue to communicate Commissioner's
approval and recorded reasons of the authorised officer to person entitled for
return of books. Retention of books-Without such communication-unlawful.
HEADNOTE:
The Revenue who had seized the books of
account and documents of the assessee under sec. 132(1) of the Income Tax Act,
1961 did not return the same to the assessee after a period of 180 days of the
seizure. The assessee filed a writ petition in the High Court inter alia
praying for a direction to the Revenue to return the said books of account. The
assessee submitted that the retention of the seized books of accounts and
documents beyond the period of 180 days was illegal and invalid inasmuch as
neither the approval accorded by the Commissioner of Income Tax for such
extended retention nor the recorded reasons of the Income Tax Officer on which
such approval was based had been communicated to him. A single Judge of the
High Court held that the retention of the books and documents beyond 180 days
was unlawful. A Division Bench dismissed the Revenue's appeal. In these appeals
the Revenue submitted that sec.
132(8) of the Act did not impose any
obligation on the Revenue to communicate the approval of the commissioner or
the recorded reason of the Income Tax Officer on which it is based to the person
from whose custody the books of accounts and documents had been seized.
Dismissing the appeals,
HELD: It is true that sub-sec.(8) of sec. 132
of the Income Tax Act, 1961 does not in terms provide that the Commissioner's
approval of the recorded reasons on which it might be based should be
communicated to the concerned person but since the person concerned is bound to
be materially prejudiced in the enforcement of his right to have such books and
documents returned to him by being kept ignorant about the factum of fulfillment
of either of the two conditions laid down therein it is obligatory upon the
Revenue to communicate the Commissioner's approval as also the recorded reasons
to the person concerned. In the absence of such communication the Commissioner's
decision according his approval will not become effective. [823 H; 824 A]
Moreover, sub-sec.(10) of sec.132 confers upon the person legally entitled to
the return of the seized books and documents a right to object to the 818
approval given by the Commissioner under sub-sec.(8) by making an application
to the Central Board stating therein the reasons for such objection and under
sub-sec.(12) of sec.132 it is provided that the Central Board may, after giving
the applicant an opportunity of being heard pass such orders as it thinks fit.
It is obvious that without the knowledge of the factum of the Commissioner's
approval as also of the recorded reasons on the basis of which such approval
has been obtained it will not be possible for the person to whom the seized
books or documents belong to make any effective objection to the approval
before the Board and get back his books or documents. [824 B-C] The scheme of
sub-secs (8), (10) and (12) of sec.132 makes it amply clear that there is a
statutory obligation on the Revenue to communicate to the person concerned not
merely the Commissioner's approval but the recorded reasons on which the same
has been obtained and that such communication must be made as expeditiously as
possible after the passing of the order of approval by the Commissioner and in
default of such expeditious communication any further retention of the seized
books or documents would become invalid and unlawful. It is obvious that such
obligation arises in regard to every approval of the Commissioner that might
have been accorded from time to time. [824 D-F]
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 1652 of 1973.
Appeal by Special leave from the Judgment and
Order dated the 25th June, 1973 of the Calcutta High Court in Appeal No. 233 of
1970.
WITH Civil Appeal Nos. 759-760 of 1973 From
the Judgment and Order dated the 2nd June, 1972 of the Calcutta High Court in
Appeal from Original Order Nos.
155 & 158 of 1970.
AND Civil Appeal No. 661 of 1975 From the
Judgment and Order dated the 15th March, 1974 of the Calcutta High Court in
Appeal No. 96 of 1972.
V.S. Desai, B.B. Ahuja and Miss A. Subhashini
for the Appellant, in CA. 1652 of 1973.
819 S.T. Desai, Miss A. Subhashini for the
Appellants in CA. Nos. 759-760 of 1973 & 661 of 1975.
Sanjay Bhattacharya, Rathindas and K.
Kathazarika for the Respondent in CA. No. 1652 of 1973.
V.B. Saharya for the Respondent in CA. No.
759 of 1973.
N.S. Das Behl for the Respondent in CA.
No.760 of 1973.
D.N. Mukherjee for the Respondent in CA.
No.661 of 1975.
The Judgment of the Court was delivered by
TULZAPURKAR, J. All these appeals, at the instance of the Commissioner of
Income-tax, raise a common question whether the Revenue is under a statutory
obligation to communicate to the person (from whose custody books of account
and documents have been seized under section 132(1) of the Income-tax Act,
1961) the approval obtained from the Commissioner of Income-tax and the
recorded reasons of the Authorised Officer/Income Tax Officer on which such
approval is based for the retention of the seized books of account and
documents by the Department for a period exceeding 180 days from the date of
seizure under sec. 132 (8) of the Income-tax Act, 1961 ? Since in all these
appeals the facts giving rise to aforesaid question are almost similar, it will
suffice to indicate briefly the facts obtaining in M/s. Oriental Rubber Work's
case (Civil Appeal No. 1652 of 1973). Under a proper authorisation issued in
that behalf under sec. 132(1) of the Act, on 17th February, 1965 a search was
conducted by the Income-tax Department in the factory premises at Kantalia as
well as the offices and godown at Mahatma Gandhi Road Calcutta belonging to the
respondent-assessee and various books of account and documents were seized from
the aforesaid premises. After lawfully carrying out the aforesaid search and
seizure, the respondent-assessee was given opportunity to inspect the seized
books and documents as also to make copies of the entries. The concerned Income
Tax Officer then issued a notice to the respondent assessee under Sec. 142(1)
of the Act in connection with its assessment for the assessment year 1964-65
and after giving several hearings which were attended by the respondent-
assessee or its representative the assessment for the said year was completed
under section 143(3) of 820 the Act on 5th February, 1969. Notwithstanding the
passing of such assessment order on 5th February, 1969, the respondent-assessee
on 27th February, 1969 moved the Calcutta High Court by way of a writ under
Art. 226 of the Constitution inter alia praying (a) for a direction to the
Commissioner of Income-tax and the concerned Authorized Officer/Income Tax
Officer to return forthwith the said books of account, documents and papers
etc. seized as aforesaid and to cancel or rescind the warrant of authorisation
issued under sec. 132(1) of the Act and (b) for a mandamus commanding the
concerned Income Tax Officer not to proceed with the assessment for the
assessment year 1964-65 until the return of documents seized on 17th February,
1965. The main submission of the respondent- assessee was that the retention of
the seized books of account and documents beyond the period of 180 days from
the date of the seizure (17th February, 1965) was illegal and invalid inasmuch
as neither the approval accorded by the Commissioner of Income-tax for such
extended retention nor the recorded reasons of the Authorized Officer/Income
Tax Officer on which such approval was based had been communicated to the
respondent/assessee and that without the return of the seized books of account
and documents no assessment for the concerned assessment year 1964-65 could be
proceeded with or made. On behalf of the Revenue it was pointed out that the
concerned Income Tax Officer had recorded his reasons seeking approval of the
Commissioner of Income-tax for extended retention of the seized books of
account and documents and had obtained approval of the Commissioner of
Income-tax for such extended retention from time to time and therefore such
retention of the seized books and documents beyond 180 days was perfectly legal
and valid that there was no obligation under sec. 132(8) of the Act to
communicate the Commissioner's approval for such extended retention or the,
recorded reasons of the Income Tax Officer therefor to the respondent-assessee
and that in any event due inspection of the seized books and documents was
afforded to the respondent assessee who was also permitted to take copies of
the entries in the books and after giving proper hearing to the
respondent-assessee the assessment for the year 1964-65 had been validly
completed on 5th February, 1969 long before the respondent-assessee approached
the Court and obtained a Rule Nisi. A learned Single Judge of the High Court
held that the seized books of account and other documents could not be retained
beyond the period of 180 days without a complete and effective order of
approval for such extended retention of the said books and documents and that
since the approval of 821 the Commissioner and the recorded reasons therefore
had not been communicated to the respondent-assessee, the retention of the
books and documents beyond 180 days was unlawful. The learned Judge, therefore,
ordered the issuance of a mandamus directing the Commissioner and the concerned
Income Tax Officer to return all the seized books and documents and he further
ordered that the concerned Income Tax Officer shall be at liberty to complete
the assessment for the year 1964- 65 after the return of the said books and
documents and after issuing afresh statutory notices under section
142(1)/143(2) of the Income-tax Act to the respondent- assessee. In rendering
the aforesaid decision, the learned Judge followed two earlier decisions of his
own High Court in Mahabir Prasad Poddar's case decided by T. K. Basu, J.
and his own decision in C. K. Wadhwa's case
(which is the subject matter of the companion Civil Appeal No.760 of 1973
before us). At the instance of the Commissioner of Income- tax, an appeal was
preferred to the Division Bench of the High Court being Appeal No. 233 of 1970.
The self-same contentions were urged on behalf of the Revenue in the appeal and
it was specifically submitted that the assessment for the assessment year
1964-65 having been completed on 5th February, 1969 long before the rule nisi
had been issued, the direction given by the learned Single Judge with regard to
the liberty to complete the assessment for the said assessment year had become
infructuous. The Division Bench, however, negatived all the contentions a
dismissed the appeal affirming all the directions given by the learned trial
Judge. The Revenue has come up in appeal to this Court.
Counsel for the Revenue urged two points
before us in support of this appeal. In the first place, the counsel urged that
section 132(8) of the Income-tax Act, which deals with the extended retention
of the seized books and documents in excess of the period of 180 days from the
date of the seizure merely provides that for such extended retention the
Authorised Officer/the concerned Income Tax Officer has to record his reasons
in writing in that behalf and has to obtain the approval of the Commissioner of
Income-tax for such extended retention and there is no obligation imposed by
the said sub-section to communicate the approval of the Commissioner of the
recorded reasons of the I.T.O. on which it is based to the person from whose
custody the books and documents have been seized or to the person legally
entitled to such books and documents and therefore the High Court erroneously
held that such extended retention of the seized books and documents without
communicating the 822 Commissioner's approval and the reasons on which it is
based was unlawful or illegal. Secondly, the counsel contended that in any
event since proper opportunity to inspect the seized books and documents and to
make copies of the entries was given to the respondent/assessee and since after
issuing proper notices and giving hearing to the respondent- assessee, the
assessment for the assessment year 1964-65 had been completed long before the
issuance of the rule nisi, the same ought to have been upheld as binding on the
respondent assessee. In other words, according to the counsel for the Revenue,
the unauthorised retention of the seized books and documents beyond 180 days,
if any, could not render the assessment for the year 1964-65 properly made
invalid. Counsel further pointed out that the respondent- assessee had even
preferred appeals to higher authorities challenging the said assessment on
merits. It may be stated that Counsel for the respondent-assessee in this
appeal conceded that in all the circumstances of the case the assessment
already made on 5th February, 1969 should be allowed to stand subject of course
to the result of the appeals that have been preferred by the respondent
assessee against it. In this view of the matter, the second contention urged by
Counsel for the Revenue in this appeal has to be accepted and the assessment
for the assessment year 1964-65 made on 5th February, 1969 subject as aforesaid
to be upheld. That leaves for consideration the first contention, which as we
have indicated earlier, is common to all the appeals.
In order to decide the aforesaid contention
it will be desirable to set out the material provisions of sec.132 of the Act,
namely, sub-secs.(8), (10) and (12) thereof, which run as follows:
"132 (8) The books of account or other
documents seized under sub-section (1) or sub-section (1A) shall not be
retained by the authorised officer for a period exceeding one hundred and
eighty days from the date of the seizure unless the reasons for retaining the
same are recorded by him in writing and the approval of the Commissioner for
such retention is obtained:
Provided that the Commissioner shall not
authorise the retention of the books of account and other documents for a
period exceeding thirty days after all the proceedings under the Indian
Income-tax Act, 1922 (XI of 1922), or this Act in respect of the years for 823
which the books of account or other documents are relevant are completed.
(10) If a person legally entitled to the
books of account or other documents seized under sub-section (1) or sub-section
(1A) objects for any reason to the approval given by the Commissioner under
sub-section (8), he may make an application to the Board stating therein the
reasons for such objection and requesting for the return of the books of
account or other documents.
(12) On receipt of the application under sub-
section (10) the Board may, after giving the applicant an opportunity of being
heard, pass such orders as it thinks fit." On a plain reading of the
aforesaid provisions it will be clear that ordinarily the books of account or
other documents that may be seized under an authorisation issued under
sub-sec.(1) of sec.132 can be retained by the authorised officer or the
concerned Income-tax officer for a period of one hundred and eighty days from
the date of seizure, where after the person from whose custody such books or
documents have been seized or the person to whom such books or documents belong
becomes entitled to the return of the same unless the reasons for any extended
retention are recorded in writing by the authorised officer/the concerned
Income Tax Officer and approval of the Commissioner for such retention is
obtained. In other words two conditions must be fulfilled before such extended
retention becomes permissible in law: (a) reasons in writing must be recorded
by the authorised officer or the concerned Income-tax Officer seeking the
Commissioner's approval and (b) obtaining of the Commissioner's approval for
such extended retention and if either of these conditions is not fulfilled such
extended retention will become unlawful and the concerned person (i.e. the
person from whose custody such books or documents have been seized or the
person to whom these belong) acquires a right to the return of the same
forthwith. It is true that sub-sec.(8) does not in terms provide that the
Commissioner's approval or the recorded reasons on which it might be based
should be communicated to the concerned person but in our view since the person
concerned is bound to be materially prejudiced in the enforcement of his right
to have such books and documents returned to him by being kept ignorant about
the factum of fulfillment of either of the 824 conditions it is obligatory upon
the Revenue to communicate the Commissioner's approval as also the recorded
reasons to the person concerned. In the absence of such communication the
Commissioner's decision according his approval will not become effective.
Moreover, sub-sec.(10) confers upon the
person legally entitled to the return of the seized books and documents a right
to object to the approval given by the Commissioner under sub-sec.(8) by making
an application to the Central Board stating therein the reasons for such
objection and under sub-sec.(12) it is provided that the Central Board may,
after giving the applicant an opportunity of being heard pass such orders as it
thinks fit. It is obvious that without the knowledge of the factum of the Commissioner's
approval as also of the recorded reasons on the basis of which such approval
has been obtained it will not be possible for the person to whom the seized
books or documents belong to make any effective objection to the approval
before the Board and get back his books or documents. In our view the scheme of
sub-secs. (8), (10) and (12) of sec.132 makes it amply clear that there is a
statutory obligation on the Revenue to communicate to the person concerned not
merely the Commissioner's approval but the recorded reasons on which the same
has been obtained and that such communication must be made as expeditiously as
possible after the passing of the order of approval by the Commissioner and in
default of such expeditious communicating any further retention of the seized
books or documents would become invalid and unlawful. It is obvious that such
obligation arises in regard to every approval of the Commissioner that might
have been accorded from time to time.
In the result the orders passed by the High
Court directing the return of the seized books of account and documents to the
respondents in each of the appeals are confirmed and the appeals (subject to
the directions given below in two of them) are dismissed with no order as to
costs.
In Civil Appeal No.1652 of 1973 the
assessment order passed on 5th February, 1969 is upheld subject to the result
of the appeals that may have been preferred against it. In Civil Appeal No.661
of 1975 it is directed that the assessment orders passed for the concerned assessment
years would be subject to the appeals already preferred if any or such as might
be preferred in accordance with law, against the same.
H.S.K. Appeals dismissed.
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